The
following information is available for Huntley Corporation’s pension plan for
the year 2011:
Expected
return on plan assets ………………………….. $ 15,000
Actual
return on plan assets ……………………………… 17,000
Benefits
paid to retirees ………………………………….. 40,000
Contributions
(funding) ………………………………….. 95,000
Discount
rate ……………………………………………… 10%
Accrued
benefit obligation, Jan. 1, 2011 ………………….. 500,000
Service
cost ……………………………………………….. 65,000
Huntley
uses the deferral and amortization approach under IFRS to account for its
defined benefit plan.
Instructions
(a)
Calculate pension expense for the year 2011, and provide the entries to
recognize the pension expense and funding for the year, assuming that Huntley
accounts for its pension under the deferral and amortization approach.
(b)
Calculate pension expense for the year 2011, and provide the entries to
recognize the pension expense and funding for the year, assuming that Huntley
accounts for its pension with the immediate recognition approach. Assume that the
ABO provided at January 1, 2011, for accounting and funding purposes is the
same.
(a) Calculation of pension expense using the
deferral and amortization approach:
Service cost $ 65,000
Interest cost ($500,000 X .10) 50,000
Expected return on plan assets
(15,000 )
Pension expense for 2011 $100,000
Pension Expense....................... 100,000
Accrued Pension Asset/Liability... 100,000
Accrued Pension Asset/Liability....... 95,000
Cash.............................. 95,000
(b) Calculation of pension expense using the
immediate recognition approach:
Service cost $65,000
Interest cost ($500,000 X .10) 50,000
Actual return on plan assets (17,000 )
Pension expense for 2011 $98,000
Pension Expense....................... 98,000
Accrued Pension Asset/Liability... 98,000
Accrued Pension Asset/Liability....... 95,000
Cash.............................. 95,000
